Report: State growth lags behind nation

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Jan 28, 2012 at 12:01 AMJan 28, 2012 at 6:50 PM

The Massachusetts economy grew at a slower clip than that of the U.S. during the final three months of last year, marking the first time in six quarters that the state’s growth failed to outpace the nation’s, according to a new report.

Bob Salsberg/Associated Press

The Massachusetts economy grew at a slower clip than that of the U.S. during the final three months of last year, marking the first time in six quarters that the state’s growth failed to outpace the nation’s, according to a new report.

MassBenchmarks, a collaboration of the University of Massachusetts Donahue Institute and the Federal Reserve Bank of Boston, released estimates yesterday showing the gross state product growing at an annual rate of 2.3 percent in the fourth quarter of 2011. The Commerce Department reported yesterday that the U.S. economy, as measured by the gross domestic product, or GDP, grew at a 2.8 percent annual rate over the same three-month period.

The last time the state’s economy grew more slowly than the U.S. was in the second quarter of 2010.

Economists, however, said they did not think Massachusetts is headed for a long-term slump.

“The rise in the stock prices of leading Massachusetts firms, improved consumer confidence, and sharp increases in discretionary consumer spending in recent months are all encouraging signs that the recovery under way can maintain its momentum,” said Martin Romitti, director of economic and public policy research at the institute and managing editor of MassBenchmarks.

Economists projected that the state’s economy would rebound to 3.5 percent growth in the first quarter of 2012 and 4 percent in the second quarter, based on an analysis of the report’s leading index.

Three principal factors were cited for the fourth quarter slowdown in Massachusetts compared to the nation.

The report said worldwide demand for information technology products, a staple of the state’s economy, peaked in the early part of 2011 but softened during the latter portion of the year.

Alan Clayton-Matthews, a Northeastern University economist and MassBenchmarks analyst, said the timing of business expansion in the state also appeared to be a factor.

“To the extent that businesses accelerated their hiring during the first half of the year, they may have shifted employment and income growth from the second half of the year to the first half,” Clayton-Matthews said.

The state’s job growth fell to 0.8 percent in the third quarter and just 0.4 percent in the fourth quarter, compared to growth rates of 1.7 percent and 3.1 percent during the first two quarters of the year, respectively.

The declining job growth was also borne out by the most recent employment figures issued by the state Division of Labor and Workforce Development. The report showed a decrease of about 6,200 jobs in Massachusetts in December, while November was revised downward to show a gain of 300 jobs as opposed to the original estimate of a 5,000 job gain.

The state’s unemployment rate was 6.8 percent in December — the lowest rate in three years — and remained well below the national jobless rate of 8.5 percent. The state uses two different methods for calculating the unemployment rate and the total number of jobs.

European debt problems were also cited in the MassBenchmarks report for the slowdown in the Massachusetts economy. The report said it appeared the crisis had already begun to have a negative impact on the state’s exports.

Exports of Massachusetts merchandise increased 5.7 percent during the first 11 months of 2011, but that compared to 11.5 percent export growth in the previous year.

The state’s overall economy grew 1.9 percent in last year’s first quarter, 4.1 percent in the second quarter and 3.2 percent in the third quarter, according to MassBenchmarks. The corresponding rate of growth in the nation’s GDP over the first three quarters was 0.4 percent, 1.3 percent and 1.8 percent.

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